Legal Question in Banking Law in India

LC was presented by the seller to the advising Bank within the valaidity of LC. However the advising Bank delayed for one month in presentation of documents to the issuing Bank by which time the LC had expired. The advising Bank refused to honour LC citing the presentation as non complying. Payment was finally made by the buyer after removing discrepancy. However the seller has now claimed interest charges for late payment from the Issuing Bank. Place of presentation of documents is not mentioned in LC. My questions are as follows:

1. What is the role of the Advising Bank? Whether it only remains as an advising Bank or assumes its responsibility as nominated or Negotiating Bank? Whether the advising Bank's responsibility is lesser than nominated or Negotiating Bank?

2. Whether issuing Bank has the right to refuse to honour LC since since advbising Bank delayed in presentation of documents to the issuing Bank by which time the LC had expired?

3. WhiCH BANK should pay the interest for delayed period?


Asked on 5/20/11, 12:03 am

1 Answer from Attorneys
J. Radhakrishnan independent Practice

The Advising Bank had only a role of advising about the issuance of the LC. It appears that it has not confirmed the credit, nor has it required presentation of the documents to it. Its role is not like a negotiating Bank. If the advising bank had in its advice required the documents to be presented to it, then if it delays in presentation of the documents to the designated confirming or negotiating Bank, it becomes liable as an Agent to compensate the seller for damages on account of delayed realisation of the amount under the LC. Otherwise it has no liability

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Answered on 5/23/11, 6:36 am


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